Σχόλια 0

Το κείμενο του εγγράφου

Financing Education

1

Financing Education

Financing Education

Paying for college is a major expense in the life cycle, on par withpaying for a house or a new vehicle. While some people will havethe financial assistance and moral supportof a family whileattending school, others may have to make this difficult financialsituation work on their own.

Aside from the obvious costs associated with college—namelytuition—there are a number of hidden expenses that you willneed to account for in order to effectively plan for the total costsof attending school. This module will cover some of the commonexpenses associated with returning to school while alsohighlighting some of the methods available to help reduce thefinancial burden.

Please keep in mind that while some of this information isgeared toward financing education for a child or dependent, thismodule canalsobe used for reflection by adult learners or non-traditional students that may be returning to education later inlife and financing it on their own.

While financing higher education may be one of the mostfrequent times in which families or individuals will encounterthese issues, many of the principles covered here can also applyto financing a private or boarding education at younger ages.

Overview

Is Education Affordable?

Financing Education: What Are theCosts?

Housi ng

Food

Transportati on

Computers

Stayi ng Connected

Insurance

Addi ng i t Up

How Will Your Student Pay?

Worki ng Whi l e i n School

Financial Aid

Free Application for FederalStudent Aid

El i gi bi lity

Scholarships

Basi c Informati on

Researchi ng Schol arships

Use a Free Schol arship SearchServi ce

Insti tuti onal Schol arships

Saving for School

529 Col l ege Savi ngs Pl ans

Types of 529 Pl ans

Tax Benefi ts

Enrol l i ng i n a 529 Pl an

Financing Education

2

Financing Education

Is Education Affordable?

Sending a student off to college is supposed to be a rewarding moment to be celebrated. Unfortunately,the finances involved can often turn this from a positive experience to a major stressor.

College is not cheap, and in 2004,the average college student graduated with over $20,000 in debt—counting both student loans and credit cards. That figure steadily increases each year as state budgetsget tighter and tuition rates increase in response. This is paired with several years of recent economicturmoil in the United States which have made higher education an increasingly costly expense ondiminishing incomes.

It appears, at first glance, that the average credit card debt decreases, but a closer

look shows that itmore than doubles from freshman to senior year. It does, however, decrease as an overall percentageof the total debt.

Financing Education

3

Financing Education

Ongoing or recurring student expenses:



Housing



Food



Transportation



Computers



Staying Connected



Insurance

Financing Education: What Are the Costs?

Aside from the obvious tuition costs which will varyfrom school to school, there are several maincategories of expenses that students may incur. It isimportant to recognize what these potentially ongoingor recurring expenses can be so that you can develop aplan for “who will pay for what.”

Housing

Students can learn valuable life lessons by living on their own.When considering housing options, thinkabout the potential loss of opportunities (like sociallife/friends, activities, you’re there so you knowwhat’s going on, easier to get involved) or other non-financial benefits of living on or off campus.

Housing options may include:

Dorms



Costs are fairly straightforward.



Many freshmen are required tolive in the dorm the first year.



Many 2-year and technical colleges do not offer dorm living.



Newer dorms may offer more “apartment-style” or “suite” living.

Apartment



May require first and/or last month rent in addition to a security deposit.



Many parents prefer to review the lease or even check the apartment before the student makesa final decision.



The standards of student apartments vary a great deal, from old, abused houses to luxury high-rise buildings.



Encourage your student to do the research to find out what is included in the rent. Will theyhave to pay extra for water, heat, electricity, cable, etc.?



Is parking available or will it cost extra?



Tell them to talk to their roommates about how they will pay the bills and divide householdchores. A

few good ground rulescan save

a lot of conflict in the long run.

Living at home



Consider the cost of travel: time, gas insurance, etc.



Living with relatives or friends



Have your student determine up front what their contributions to the household will

be so thathurt feelings are not created later.

Food

Some schools will offer a meal plan, while others may not. If you decide that a meal plan is best for youor your student, review the costs and details available for each plan. You’ll find this information in thestudent handbook or on the school website. Determine which meal plan best suits your student’s eatingpatterns and needs.

Financing Education

4

Financing Education

Alternatives to bringing a car

Encourage your student toinvestigate whether any of thefollowingwould be more appropriatefor their transportation needs:



Bicycle



Public Transportation (studentdiscounts may be available)



Moped/scooter

If you or your student seldom eats breakfast and eats out several times a week, a meal plan that offersthree meals per day is less than ideal. Remember to figure in the costs of snacks, beverages and latenight pizza when building your food budget.

Many schools, including UW-Madison and other UW System schools are turning to debit card systemswhere the student can spend the available funds on food or at other university-related retailers. Moreand more, this is being connected into the students’ ID card.

It is important to know that while some colleges allow students living off-campus to participate in theircampus meal plans, others may not. If your student plans to live off campus, remind them to budget forthe cost of eating out as well as groceries.

Transportation

Most students won’tNEED

a car during their first year ofcollege, as some campuses are small enough that you canwalk to any building in a few minutes and parking may belimited. Larger campuses generally have access to buses orshuttles.

Many students do not bring vehicles toschool, while at thesame time, many do. Encourage your student to seek outfriends and classmates who may have a car, may live nearyour students’ home (for carpooling during school breaks),or may allow your student to borrow their vehicle forsmaller needs (this may depend on the car insurance). Some colleges do not allow freshmen to bring acar due to lack of parking availability. Living off campus may make parking more available or affordable.

In many cases, the costs of driving and parking a car (vehicle payments, insurance, gas, maintenance,parking) on campus will quickly add up to offset the convenience of having the vehicle around.

Computers

College students use computers almost daily to search the web, check for homework assignments, e-mail family and friend, or check bank balances. Some universities (e.g. UW-Stout) provide all incomingfreshmen with a laptop computer (costs are paid through tuition).

While desktop or laptop computers can be beneficial in the home, the truth is, your student shouldn’tneed to own a computer to succeed in school. Colleges provide ample access to computers in publicbuildings, libraries, and computer labs.

On the other hand, it might be worth the cost of a computer for the convenience alone; newercomputers can be used to access the internet from many points on campus through wireless networks.

Thankfully, computer costs have steadily decreased over the past few years as technology has improved.You will want to check the computer’s abilities with the student’s planned field of study; however moststudents would be able to accomplish their work with a computer that has word processor, spreadsheet,and presentation software and the ability to connect to the internet. Realize that a computer that meetsthese needs may not have to be top-of-the-line.

Financing Education

5

Financing Education

Keep in mind the additional expenses like a printer, paper and ink cartridges.

Staying Connected

Depending on you or your student’s specific needs, staying connected with home and family may be animportant part of the school experience. In order to do this, consider the options:

Cell phones



A majority of college students own their own cell phone.



Some colleges are removing land lines in dorms to save costs (although they are still availableupon request).



Review yourcell phone plan to make sure it still meets your needs when your child goes away tocollege (may need to add minutes or change service area). Know if there are charges for textmessages.

Calling cards

Calling cards can be an

economical way to keep in touch if your student doesn’t have a cell phone.

Electronically

Many students use e-mail or instant messaging as a way to correspond. Again, even if they don’t own acomputer, college campuses offer access to the internet at a number of public locations.

Insurance

When the student moves out on his or her own, there may be new insurance needs that come up,including car, health, property, or renters’ insurance. Ask your insurance representative for an insurancereview to make sure your coverage is up to date

and appropriate for your student’s current living status.

Car insurance



Good student discount is still available to college students.



A distant student discount may be available to families whose student is attending school atleast 100 miles away anddoes not have a vehicle on campus. This is for the student who drivesonly occasionally (e.g. Christmas and spring break).



Most insurance companies will not cover a student who uses their vehicle as a part of their job(e.g. pizza delivery).



Most car insurance policies do not cover travel in Mexico (spring break?).

Health Insurance



Most family health insurance companies will cover full-time students until a certain age (usually23 to 25).



Most colleges offer some kind of health insurance coverage forpurchase.



HMO’s may not cover costs incurred outside of their service area.



Make sure students are aware of the location of the student health care center on campus.



If student decides to take off a semester, you may want to check into short-term major medicalcoverage.

Property Insurance



Most colleges offer property insurance policies for purchase.

Financing Education

6

Financing Education



Check your homeowner’s policy for coverage. Coverage may differ depending on whether youlive in a dorm or an apartment/house.



Encourage your student to keepa list of the things they take to college as well as any serialnumbers and pictures that may help them identify their property.

Adding It Up

Considering the diversity of the expenses above, it may become difficult to calculate the costs of acollege education. Fortunately, many college websites have their own templates for calculating cost. Ifyou can’t find it, you may want to contact your school’s admissions office.

Sallie Mae has a number of calculators including long term planning, college cost, and

Shop around for the best deal(consider annual fees and AnnualPercentage Rates).



Avoid late or over-the limit fees.



Avoid maxing out the credit line(suggests that you overspend).



Save receipts and review eachmonth. Make sure all chargesare accurate.



Keep a record of charges as yougo so you won’t be surprisedwhen 瑨e bill co浥s.



Protect the card from theft.

Scenario for Parents:

Your student has maxed out their credit cardon unintended expenses and doesn’t have the浯ney 瑯 pay even 瑨e 浩ni浵洠balance.When he or she infor浳

you abou琠hisIhercreTi琠carT Teb琬 how will you suppor琠hisIhereffor琠瑯 resolve 瑨e proble洿

How Will Your Student Pay?

What will your student use to make purchases when atcollege?The college may have a campus debit card forstudents to use. Parents/students can deposit money intothe account(s) and that’s what the student uses to makepurchases. They are limited to the cash balance in theaccount. No cash, no spending.

Many college students will still use a checkbook to pay foritems. It is advisable to use a checkbook to pay for largerpurchases like rent or tuition payments so that you keep arecord of your payments. Be sure to balance your checkbookto avoid overdraft fees and check your records against thebank statement.

Do not assume that your student understands how debit,checking, or credit work. In fact, confusion over theintricacies of these options can be a contributor to buildingdebt. Check with your student to see if he or she wouldbenefit from some education on these topics.

Another option for students is a debit card, which takes money directly out of a checking account eachtime it is used. With debit cards—which essentially operate like checks—it is crucial to keep track of thebalance, even though it may be easier to make casual purchases. Hold on to receipts and continue tobalance your checking account periodically. Most banks provide on-line tracking systems.

Debit and credit cards may allow your student to access ATMs to deposit and withdraw cash. Be careful,however:



There might be extra charges for machines not owned by your financial institution.

Students need to establish a limit and a strategy if planning to use a credit card.



College students are bombarded with credit card applications. Why? Credit card companiesmake a lot of money from them, especially when they don’t pay their billsin full.



Late fees and interest payments add up to hundreds of dollars a year.

Financing Education

8

Financing Education

Working While in School

“Many students struggle with the conflicting demands of working enough hours to afford college andstudying enough hours to do

well in their classes.” (M. Savage, 2003)

For some, the decision to work while in school is a matter of personal choice. Depending on thestudent’s arrangement and the percentage of school costs they are responsible for covering; they mayneed to work in

order to make ends meet. However, in some cases, students might be better offfinancially by taking more low-interest student loans and graduating in 4 or 5 years, rather thanextending college another year or two in order to work more hours.

Balancing academics and extra-curricular activities with employment is challenging. Parents need toemphasize that school is the priority. Most experts recommend that students work no more than 20hours per week. For most freshmen, 10-15 hrs/week is more realistic since they are still adjusting totheir new environment. Start slowly with 8-10 hrs and work your way up if things are going smoothly.

Students should seek out jobs that allow a lot of flexibility in scheduling. Off-campus jobs may pay more,but there are

advantages to on-campus jobs, including:



Flexibility



Practical experience related to student major



Location



Work with faculty and staff who can provide guidance on the school system and references forfuture work



Commuting students can benefit from the support systems and social opportunities that comewith working on campus



Some work-study positions may only be available to students in need of financial aid

Financing Education

9

Financing Education

1. Cost of attendance

$25,000

2. Expected family contribution

Student's contri buti on

$ 2,000

Parents' contri buti on

$13,000

Total family contribution

$15,000

3. Resources

$ 1,000

4. Financial need = (1)-

(2)-

(3)

$ 9,000

Financial Aid

Financial Aid can take several forms:



Scholarships are generally merit based anddo not have to be repaid.



Grants are a form of financial aid, generally based on need, which you do not have to repay.

Three basic ingredients determine how much need-basedaid your student is eligible for:

1.

The cost of the school your child is considering or already attending.

Every school calculates its"cost of attendance" or "COA" based on federal guidelines. As you might expect, many privatecolleges have a high COA while public universities and colleges have a relatively low COA forstate residents.

2.

The dollar amount of "resources" provided to the student from outside sources.

Scholarships,for example, are considered a resource. So are payments of tuition directly to the college by agrandparent or employer. A resource will reduce the COA, and therefore the need-based aidaward, on a dollar-for-dollar basis.

3.

The "expected family contribution" or "EFC."This is the amount your family will be expected topay for college based on your particular financial circumstances. This figure is determined eachschool year by the federal government with data you provide on the Free Application for FederalStudent Aid (FAFSA). The calculation considers the student's income and assets and the parent'sincome and assets. (For independent students, parental income and assets are excluded.) Theparents' contribution is divided by the number of family members attending college at leasthalf-time.

Assume, for example, that your child is planning to attend a private college costing $25,000 per year.Your expected

family contribution is $15,000, consisting of the student's contribution of $2,000 andyour contribution of $13,000. A local civic organization has awarded your child a $1,000 scholarship.Your child's financial need is determined to be $9,000 computed as

follows:

The school will attempt to put together an aid package that covers the $9,000 in need. This packagecan be a combination of grants, loans, and work-study from federal, state, and college sources.

The Free Application for Federal Student Aid (known as the FAFSA) is a form that can be filled outannually by current and anticipating college students (both undergraduate and graduate) in the UnitedStates to determine their eligibility for federal student financial aid. This canincludePell grants, Staffordloans, PLUS loans, and work-study

programs.

FAFSA applications are accepted each year beginning on January 1. Previous applicants are able torenew their application at this time, but some information (such as taxes and saving details) must beupdated annually. Most states will use information from the FAFSA program to award non-federal aid.

Every family and/or student

should complete theFAFSA form.

This will determine if and how muchfinancial aid your student will be eligible for. It is based on calculations that determineyour expectedfamily contribution. This needs to be completed annually and you will need to know the parents andstudents financial information to complete the form. It can be completed on a written form or via theweb.

Eligibility

Nearly every student is eligible for some form of financial aid. Students that may not be eligible forneed-based aid may still be eligible for an unsubsidized Stafford Loan regardless of income orcircumstances. A studentthat can meet the following criteria may be eligible for aid:



is a U.S. citizen, a U.S. national, or an eligible non-citizen;



has a valid Social Security number;



has a high school diploma or GED or for adult students, pass an Ability-to-Benefit test;



isregistered with the U.S. Selective Service (male students age 18-25);



completes a FAFSA promising to use any federal aid for education purposes;



does not owe refunds on any federal student grants;



is not in default on any student loans; and



has not been found guilty of the sale or possession of illegal drugs while federal aid was beingreceived.

Most scholarships will ask for some fundamental information about the student, so preparing theseitems in advance can save you time when applying for multiple scholarships. For example, details onprevious schooling,citizenship, state of residence, religion, ethnic background, disability, military status,employer, membership organizations, andmore may come up repeatedly.

Additionally, questions may center on the academic performance, extracurricular participation andcareer plans of the student. The student should take time to reflect on why he or she wants to attendcollege, what subject they plan to major in, and potential career plans. Simply saying, “I’m undecided”will be a tough sell for scholarship boards who could review hundreds of applications.

Researching Scholarships

Typically, the smaller an area which is covered by the scholarship, the better your student’schances ofwinning. High school counselors should know about local scholarship opportunities for graduating highschool students. Other scholarships may be available for residents of your town, county, and state.

From there, look intolarger national scholarship opportunities. There include but are not limited to theReserve Officer Training Corps (ROTC), National Merit, Gates Millennium, Siemens, Coca-Cola, andRobert Byrd scholarships.

Use a Free Scholarship Search Service

A scholarship search company collects information on hundreds of awards and compares your child'sstudent characteristics with scholarship restrictions. Based on answers to a questionnaire, your child willreceive a list of possible scholarships. It is up to

your child

to decide whichones

to try for.

You should never have to pay for scholarship information. If you are asked to pay a fee for "exclusive"scholarship leads, there's a good chance the scholarship service is really ascam.

Financing Education

12

Financing Education

Don’t Forget Organizations andEmployers

Think of all of the organizationsyouare affiliated with or belong to:religious, community service,fraternal, military, union, andprofessional groups, for example.Find out if any of them sponsorscholarships for members ordependents of members.

Don't forget employers. Many largecompanies offer scholarships ortuition reimbursement programs fordependent children of employees.Check with your human resourcesdepartment to see if your companyoffers such programs.

Employers of students such as fastfood chains, department stores, and

supermarkets often providescholarships. Awards related tostudent employment can come fromunexpected sources. For example,there are a number of scholarshipsfor golf caddies.

Institutional Scholarships

A

great deal of scholarship

money is disbursed by colleges.Take time to look into at the schools you’re applying to.Investigate college websites, catalogs, and financial aid officesfor this information.

Institutional awards can be offered on a university-wide basis,or within a particular college or major. Eligibility for suchawards can be based on merit, financial need, intended major,ethnicity, or a variety of other factors. Here are somequestions your child might want to ask about these awards:



Are scholarships awarded automatically if a studentmatches certain criteria(such as GPA or SAT score)?



What is the application procedure? What materialsare required?



Is the award renewable? What are the requirementsto maintain the award?

Non-traditional students in particular should be encouragedto contact their institutionto see if they have any scholarshipsavailable for returning adult students.

Financing Education

13

Financing Education

Check to see if your school iseligible under 529 rules:

http://www.savingforcollege.com/eligible_institutions/

Saving for School

While you can build up the money to spend on education for yourself or for a child/dependent throughtraditional savings and investment options, one savings product that applies to this situation specificallyis the 529 college savings plan.

529 College Savings Plans

529 Plans, named for Section 529 of the IRS code whichcreated these types of savings in 1996, areeducation savingsplans

operated by a state or educational institution designedto help families set aside funds for future college costs.

529 Plans can be

used to meet costs of qualifying

colleges nationwide. In most plans, your choice ofschool is not affected by the state your 529 savings plan is from.For example, Wisconsin residents caninvest in California plans and send students to school in Texas.

EdVestSM

is Wisconsin's official 529 college savings plan. It is administered by the Wisconsin Office of theState Treasurer and managed by Wells Fargo Funds Management, LLC.

http://www.wellsfargoadvantagefunds.com/wfweb/wf/ev/index.jsp

What if my child decides not to go to college or drops out at some point?

* The funds can remain in the account for future use for the beneficiary to attend school

* If the beneficiary does not use the money, the account can be re-designated to another beneficiarywho is a member of the family.

* You can close the account and receive the balance at any time. There is a 10% additional federal taxfor withdrawing funds this way, and federal and state income taxes must be paid on the earningsportion of the withdrawal.

* The penalty is waived if the distribution is due to

the death or disability of the beneficiary or if ascholarship or nontaxable grant is awarded to the beneficiary.

Types of 529 plans

According to SavingForCollege.com:

529 plans are usually categorized as either prepaid or savings plans.



Savings Plans

work much like a 401K or IRA by investing your contributions in mutual funds orsimilar investments. The plan will offer you several investment options from which to choose.Your account will go up or down in value based on the performance of the particular optionyou select.



Prepaid Plans

let you pre-pay all or part of the costs of an in-state public college education. Theymay also be converted for use at private and out-of-state colleges. The Independent 529 Plan isa separate prepaid plan for private colleges.

Educational institutions can offer a 529 prepaid plan but not a 529 savings plan (the private-collegeIndependent 529 Plan is the only institution-sponsored 529 plan thus far).